BP First-Quarter Profit Beats Analyst Estimates on Trading
Earnings adjusted for one-off items and inventory changes fell to $4.2 billion in the first quarter from $4.7 billion a year earlier, the company said today in a statement. That exceeded the $3.2 billion average estimate of 11 analysts in a Bloomberg News survey. Net income tripled to $16.9 billion after BP sold its half of the TNK-BP unit in Russia.
Chief Executive Officer Bob Dudley is trying to convince investors that BP is poised for growth three years after the Gulf of Mexico oil spill that left the company with a bill of more than $40 billion. The trading gain offsets a drop in oil prices and a production decline following divestments.
BP is “highlighting stronger trading and gas marketing earnings,” said Iain Reid, an analyst at Jefferies Group LLC in London. “Shares are likely to pop today” on “excellent” results, he said.
BP produced the equivalent of 2.33 million barrels of oil a day in the quarter. That’s 5 percent lower than a year earlier, though 2 percent higher than in the fourth quarter. Output in the second quarter will probably be lower, BP said.
Exxon Mobil Corp. (XOM), the world’s biggest company, last week reported an increase in profit on the strength of its chemicals business. Chevron Corp. (CVX) and Total SA (FP) reported a drop in net income. Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, may say on May 2 that profit slid to $6.5 billion from $7.28 billion, a Bloomberg survey of 11 analysts shows.
The shares rose 2.1 percent, the most since January, to 466.4 pence in London. The stock retreated 7.8 percent last year.
Fuel trading helped BP increase downstream profit to $1.3 billion in the first quarter from $490 million a year earlier, the company said. The contribution from oil and gas trading was about $500 million higher than usual, Chief Financial Officer Brian Gilvary said on a conference call.
“These strong first-quarter results demonstrate the progress BP is making,” Dudley said in a statement. The latest earnings “represent a strong start to 2013 across all of our businesses.”
The business of turning crude into gasoline and other products is improving. Global refining margins were $17.80 a barrel in the first quarter compared with $14.75 a year earlier, according to BP’s refining marker margin, a generic indicator of refining profitability.
Dudley has completed a $38 billion asset sale program a year ahead of schedule and repositioned the company in Russia by selling BP’s half of the TNK-BP venture. The deal left BP with about 20 percent of state-backed OAO Rosneft (ROSN) and $12 billion in cash, most of which will be used to buy back $8 billion in shares.
BP said in February that underlying oil and gas production, stripping out the impact of divestments, should increase this year after little change in 2012. Reported output will decline as divestitures shave off 150,000 barrels a day.
BP’s asset sales are designed to focus output on its most profitable fields. Investment will rise in 2013 to as much as $25 billion from $23 billion last year as four new projects start in Angola, Australia, the Gulf of Mexico and Azerbaijan. Investment will rise to between $24 billion and $27 billion from 2014 to the end of the decade, the company said.
The spending comes as benchmark Brent crude, used to price two-thirds of global sales, is starting to slide. During the January-to-March period, Brent futures fell 4.9 percent from a year earlier to average $112.61 a barrel, according to data compiled by Bloomberg. Goldman Sachs Group Inc. last week cut its forecast for average Brent prices in 2013 to $105 from $110.
“The statement refers to higher costs, lower production and weaker downstream in the second quarter, so earnings upgrades may be more muted than the first quarter headline figures might suggest,” said Neill Morton, an analyst at Investec Securities Ltd. in London.
BP still doesn’t know what the final cost will be for the 2010 Gulf of Mexico oil spill. The first phase of a trial to determine liability finished this month, and the process will resume in September.
Last year BP agreed to pay about $8 billion to settle lawsuits by most plaintiffs as well as $4 billion to the U.S. government in criminal penalties. The company is also facing claims from plaintiffs who weren’t covered by last year’s settlement and as much as $17 billion in fines over violations of the U.S. Clean Water Act.
The company today maintained its provision for the cost of the spill at $42.2 billion.
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